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China-Russia relations
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China-Russia pipeline would be ‘shock’ to global LNG trade: analysts

If completed, the Power of Siberia 2 would cement Beijing and Moscow’s energy ties - and cause a headache for the US, the world’s top LNG exporter

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The Power of Siberia 2, a natural gas pipeline from Russia to China and passing through Mongolia, would have broad impact on the global energy trade if completed. Photo: AFP
Kandy Wong

The long-delayed Power of Siberia 2 pipeline between Russia and China would create a “structural shock” if it begins operations, analysts said, and cause “strategic and market challenges” for the United States, the world’s current largest liquefied natural gas (LNG) exporter.

While President Xi Jinping and his Russian counterpart Vladimir Putin stood shoulder to shoulder at last week’s Shanghai Cooperation Organisation summit, Gazprom CEO Alexey Miller was quoted as saying the Russian oil giant and China National Petroleum Corporation had signed a memorandum of understanding to build the Power of Siberia 2 and the Soyuz Vostok transit pipeline through Mongolia.
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“The Power of Siberia 2 would represent a structural shock,” said Sebastian Contin Trillo-Figueroa, a geopolitical analyst based in Hong Kong. He added the pipeline, which would send 50 billion cubic metres into northern China each year, would “lock in Russian gas at scale” and reduce the use of LNG cargo shipments that are costlier and exposed to more risk.

An overland supply “is not only cheaper but also more secure”, Trillo-Figueroa added, which would help China “bypass chokepoints” and “insulate” itself from global price swings.

The US$13.6 billion pipeline project, in discussion since 2006 but put on hold multiple times, has become even more crucial to Russia since its invasion of Ukraine in 2022. After heavy sanctions were levied on Moscow by the US and much of Europe, China has emerged as a large alternative market.

Talks were revived after the war began, but unresolved questions such as pricing and the pipeline route could mean a protracted period of negotiations.

Chinese officials, despite repeated claims of progress by Russian media outlets, have provided no confirmation of substantial steps forward. The country’s total LNG imports for this year have been projected to drop 6 per cent to 11 per cent by industry news portal Oilprice.com.

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But Chim Lee, a senior analyst at the Economist Intelligence Unit, said the opening of the Power of Siberia 2 could mean “as much as half” of China’s imported natural gas would come from Russia, with the final figure dependent on Beijing’s “production and demand growth”.

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